Reliance Capital Blog

Reliance Capital, India's Berkshire Hathaway

Thursday, November 30, 2006

Ambani brothers may narrow gap

Since the billionaire Ambani brothers split the Reliance group in January, investors who stuck with Mukesh Ambani's oil business have reaped an 83 percent return, three times that from Anil Ambani's companies.

Now shares of the energy, communications and finance units that younger brother Anil runs are poised to catch up. He is adding users in the world's fastest-growing cell-phone market and spending 200 billion rupees (HK$34.8 billion) to build the world's biggest gas-fired power plant.

"Reliance Energy could be the dark horse next year," said Sanjay Lodha, Hong Kong-based senior investment adviser at Pictet Asia. "Demand for power is going to outstrip supply, so we should see utilities doing well."

The splitting of Mumbai-based Reliance was the biggest shakeup in Indian corporate history. Mukesh, 49, squabbled with Anil over a group with US$23 billion (HK$179.4 billion) in sales, equivalent to 3.5 percent of India's economy. In a deal brokered by their mother, Mukesh kept the oil and chemicals business, Reliance Industries, while relinquishing the rest to Anil, 47. For investors, the split was painful. Anil-controlled Reliance Energy is the second-worst performer on the 30-stock Sensitive Index this year. His Reliance Communications, India's second largest mobile phone operator, lost a third of its value in the three months after its March 7 listing.

A US$1,000 wager on Mukesh, who owns India's largest oil refinery, has reaped US$1,804 since the January 18 split. A similar bet on Anil paid US$1,343 as investors showed concern Reliance Energy could not secure cheap supplies of natural gas to run its plants.

The differences may narrow. India will add the equivalent of the entire population of the United States and Germany in new mobile phone subscribers by 2010 and is spending US$17 billion to double the nation's power transmission network to 125,000 kilometers.

Anil is offering LG Electronics handsets for as little as US$45 to lure customers. Mobile phone subscriber additions in India overtook China in September for the first time as it added a record number of users. Reliance Capital, which runs India's third- biggest mutual fund, and through which Anil is buying stakes in cinema multiplexes and insurers, may be another winner next year. Life-insurance coverage in India, which has one of the lowest penetration rates in Asia, will almost triple in the next five years, according to the Insurance Regulatory & Development Authority.

After the split, Reliance's shareholders got shares in the brothers' units. For every 100 Reliance Industries shares they owned, investors received five shares of Reliance Capital, seven and a half shares of Reliance Energy, 100 shares of Reliance Communications and 100 of Reliance Natural Resources.

Reliance is among 18 family-run companies listed on India's Sensex. With a combined market value of US$61 billion, the Ambani companies account for about 15 percent of the index's weight. Mukesh and Anil, ranked the second- and third-richest Indians by Forbes, have their work cut out for them as mounting competition makes it harder to expand.

Anil's Reliance Airport earlier this month lost a suit challenging the sale of the nation's two busiest airports, at Mumbai and New Delhi.

The recent share-price increases in some of Anil's companies also have made them more expensive than some in Mukesh's empire.

Mukesh has his fair share of problems, too. Reliance Industries may raise its borrowing to help get US$13 billion to fund setting up trade zones, retail outlets and rising costs at its oil exploration venture. The company said this month it will borrow US$2 billion, raising its loans by a third.

Still, investors such as India Capital Fund's Jon Thorn expect both brothers to benefit from the world's second- fastest pace of economic growth.

Indian company to open brokerage house in UAE

India's Reliance Capital Asset Management (RCAM) is seeking to establish a brokerage house branch in the UAE pending approval, according to a top executive.

"We are planning to launch our brokerage services branch in the UAE, and we are awaiting approval from the concerned authorities. We will also be seeking a presence at the Dubai International Financial Centre (DIFC) at a later stage, following the Industrial Credit and Investment Corporation of India (ICICI)," K. Rajagopal, RCAM's chief investment officer, told Gulf News on Wednesday.

The company is expecting to open the branch within two weeks as long as the approval is granted.

Yesterday, subscriptions to RCAM's new closed-end fund closed in the UAE, with the company expecting subscriptions from India and overseas of $300 million.

Rajagopal, who previously headed the treasury of the State Bank of India, is heading a mission to Kuwait, Bahrain, Oman and the UAE to market a new open-ended long-term fund. He carried out two presentations in Dubai and Abu Dhabi for the purpose.

"The UAE's Non-Resident Indian (NRI) community comes at the top Middle East based investor in our funds, and we are expecting to collect $75 million to $100 million from the region, as we already visited Kuwait, Bahrain and Oman," Rajagopal added.

Recently, Lipper, a Reuters company, classified Reliance Growth as the best performing among the five to ten years funds, with an annualised return of 71.39 per cent in the last five years.

"Following the success of our biggest fund in March, where more than $120 million was collected from the Middle East, we expect similar success to this fund as well, as there are substantial amounts of money seeking investment," said Love Yadav, RCAM's regional head for the GCC, explaining that the new fund is targeting medium and small capital.

In his presentation to the NRI community, Rajagopal illustrated the robust econ-omic performance of India, highlighting that to date, the country has received more than $4.4 billion in Foreign Direct Investment (FDI). This represents twice the figure that was invested in 2005.

"The financial institutional investments (FII) have reached $8 billion this year, while acquisitions by Indian businesses overseas total $10 billion so far, as the outflows of capital from India are witnessing remarkable growth," he said.

Reliance Capital dilutes stake in DTDC

Anil Dhirubhai Ambani Group-controlled Reliance Capital has diluted 4% from the 44% stake it acquired from DTDC in February in favour of the air express and cargo company's employees.

The dilution was part of the initial agreement for the acquisition of the stake offered by one of the promoter brothers of DTDC. Reliance Capital paid Rs 70 crore for the acquisition. The Bangalore-based DTDC is a privately held company in which Mr Subhashish Chakraborty, Chairman and Managing Director, continued to hold management control with 56% stake.

DTDC, with year-on-year growth of 30%, expects a turnover of Rs 175 crore in FY 2007. Mr S.K. Mukhopadhyay, Senior Vice-President, Corporate Affairs, told Business Line that DTDC was keen to be part of the industry's growth story and was open for acquisition to expand its business. "We have not focused on the issue or any company now," he said adding DTDC was preparing itself to face the competition. It was also looking at IPO next year for a better visibility and funding its future expansion plans

Thursday, November 16, 2006

PNB launches health insurance product

Punjab National Bank (PNB) on Wednesday launched PNB Arogya Shree to provide health insurance for its 35 million customers.

The new offering is a product of Reliance General that has been tailor-made for PNB customers.

"The product that we have launched today is unique. Our large customer base has helped us in getting the premium amount lowered. It will have additional features and would be marketed through our branches," Mr K. Raghuraman, Executive Director, told newspersons.

He expects the initiative to bring in new customers and aid in customer retention.

The scheme would initially be available on a pilot basis at 64 select core banking solution (CBS) branches in Delhi, Mumbai and Lucknow with effect from today.

This pilot would run until December 31. From January 2007, the product would be available at about 450 CBS branches across the country.

Mr K.A. Somasekharan, President and CEO of Reliance General Insurance, said that the tie-up with PNB would give a big boost to the company's business.

He said that Reliance General Insurance has not been active in the last five years, but has become active after April 1, 2006 and increased focus on the retail segment.

In the first six months of the current fiscal, the company recorded premium income of Rs 445 crore (Rs 88 crore), of which new premium income stood at Rs 350 crore.

Reliance General emerges as fastest-growing non-life insurer

Reliance General has emerged as the fastest-growing general insurer during the first half of the financial year, according to figures released by the Insurance Regulatory and Development Authority (IRDA).

According to IRDA figures, Reliance General's premium income shot up by a whopping 396.12 per cent during the first half of the fiscal (April-September), from Rs76.09 crore in H1 of 2005-06, to Rs377.53 crore in the corresponding period this year.

ICICI Lombard came second in terms of growth, with its premium income shooting up by 85.34 per cent (from Rs822.91 crore in H1 of 2005-06, to Rs1,525.16 crore in H1 of the current fiscal.

Private non-life insurers took all the top slots in terms of growth, though they expanded from a small base. IFFCO-Tokio's premium income expanded by 53.37 per cent, Tata-AIG's by 36.73 per cent, Bajaj Allianz's by 34.82 per cent, Royal Sundaram's by 28.42 per cent, and Cholamandalam's by 25.44 per cent.

HDFC Chubb was the only non-life insurer (both in the private and public sectors) that saw a decline in premium income in H1 of the fiscal: it fell by 1.64 per cent.

Among public sector non-life insurers, Oriental saw its premium income grow by 12.2 per cent during H1 of the fiscal, over the corresponding period of the previous financial year. New India, still the largest non-life insurer (with total premium of Rs2,447.25 crore in the first half of this year), saw its business grow by a steady 9.98 per cent, while United India's premium grew by 9.35 per cent, and National's by 3.23 per cent.

Private non-life insurers saw their premium incomes grow by 61.45 per cent during the first half of the current fiscal (over the previous year's H1), from Rs2,688.46 crore to Rs4,340.52 crore. Public sector non-life insurers saw their total business growsend this article to a friend by a modest 8.74 per cent, from Rs7,390.65 crore to Rs8,037.19 crore.

Overall, the general insurance business in India has grown by 22.8 per cent in H1 of the current fiscal - from Rs10,079.11 crore of premium collected in H1 of 2005-06, to Rs12,377.71 crore in H1 of this fiscal.

Wednesday, November 15, 2006

Reliance General Insurance ties up with UCO Bank

Reliance General Insurance Company Limited, a part of the Anil Dhirubhai Ambani Group, has entered into a tie-up with UCO Bank for selling personal accident insurance products through the bank's network across the country.

Chief Executive Officer of Reliance General Insurance K A Somasekharan said UCO Bank was the first public sector bank with which the company had entered into a bancassurance tie up.

He said the company had earned a premium income of Rs 378 crore till date in the current financial year.

Under the arrangement, UCO Bank depositors would be covered under the personal accident insurance scheme at a one-shot premium of Rs 6.99 for Rs one lakh.

The sum assured may go in multiples of Rs one lakh to a maximum amount of Rs five lakh.

He said Reliance General was also talking with other nationalised banks as well for bancassurance tie-ups.

UCO Bank Chairman and Managing Director V Sridar said, the target income from third party distribution during the current financial year had been fixed at Rs 20 crore.

Brokers reduce rates to fight Reliance Money

Reliance Money's foray into stock broking has set the cat among borkerage pigeons, who are now slashing rates drastically to fight the onslaught and stay afloat. Among other initiatives, it is the pre-paid card concept from Reliance Money that is all set to revolutionise stock broking activities.

The new wonder is Reliance Money's pre-paid card for stock market brokerage. Reliance Money, the financial services division of Anil Dhirubhai Ambani Group-promoted Reliance Capital, is bringing to the market pre-paid cards in denominations of of Rs 500, Rs 1,350 and Rs 2,500 with validity period of two months, six months and twelve months respectively.

These cards would offer brokerage at one-third of the rate being charged by institutional and individual brokerage houses. Sample this. For a pre-paid card worth Rs 500, an investor can trade upto Rs 90 lakh in futures and option segment or can undertake intra-day trade of similar amount. Besides, an investor can undertake a delivery-based activity of Rs 10 lakh.

The Rs 1350 worth pre-paid card, total trading limit would reach Rs 3 crore, of which Rs 2.70 crore is for the F&O segment and balance Rs 30 lakh for delivery-based activities.

For Rs 2500 pre-paid card, total trading limit is fixed at Rs 16 crore, that include F&O limit of Rs 15.40 crore and balance Rs 60 lakh for delivery-based broking, says Jigar Bhatt of Times Commodity, a franchisee of Reliance Money and has begun online trade.

The proposed acquisition will mark the immediate entry of the company into the exciting growth area of money changing and money transfer.

Travelmate Services (India), wholly owned by the Kuoni Group, has 36 offices, 2900 agents and 91 employees across the country, and is presently headquartered in Mumbai.

The company is one of India`s leading and fastest growing financial services companies. It has interests in asset management and mutual funds, life and general insurance, private equity and proprietary investments, stock broking and other activities in financial services.

The company recently posted 17.96% rise in net profit after minority interest and share of profit of associates to Rs 1919.90 million for the quarter ended September 30, 2006 whereas the same was Rs 1627.50 million for the quarter ended September 30, 2005.

Income from operations rose 118.08% to Rs 5368.60 million for the quarter ended September 30, 2006 whereas the same was Rs 2461.70 million for the quarter ended September 30, 2005.

The company has posted 6.18% increase in net profit after tax to Rs 1671.50 million for the quarter ended September 30, 2006 whereas the same was at Rs 1574.20 million for the quarter ended September 30, 2005.

Total income has increased by 22.92% to Rs 2228.40 million for the quarter ended September 30, 2006, whereas the same was Rs 1812.80 million for the quarter ended September 30, 2005.

Reliance Capital, which plans to hold the single largest equity stake in the proposed venture, will seek an asset reconstruction license from the Reserve Bank of India next month, the report said.Under Indian investment law, foreign investors can hold up to a maximum 49% stake in asset reconstruction companies.